UNITED STATES

                  SECURITIES AND EXCHANGE COMMISSION

                       Washington,  D.C.  20549

                               FORM 10Q

Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended March 31, 2001

Commission File Number: 2-88927

                      FIRST KEYSTONE CORPORATION
        (Exact name of registrant as specified in its charter)


                  Pennsylvania                                23-2249083
   (State or other jurisdiction of             (I.R.S. Employer
    incorporation or organization)        identification No.)


111 West Front Street, Berwick, PA      18603
(Address of principal executive offices)                         (Zip Code)


Registrant's telephone number, including area code:  (570) 752-3671

     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.

                         Yes   X     No


     Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:

Common Stock, $2 Par Value, 2,833,727 shares as of March 31, 2001.


<PAGE>


                    PART I. - FINANCIAL INFORMATION

Item. 1  Financial Statements

<TABLE>

               FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                              (Unaudited)


<CAPTION>

(Amounts in thousands, except per share data)

                                                   March       December
                                                    2001          2000
<S>                                          <C>            <C>
ASSETS
Cash and due from banks                             $  5,681       $  6,733
Interest bearing deposits with banks                  11,300          2,428
Available-for-sale securities carried
  at estimated fair value                            157,014        142,224
Investment securities, held-to-maturity
  securities, estimated fair value
  of $8,407 and $8,635                                 8,459          8,737
Loans, net of unearned income                        188,994        190,671
Allowance for loan losses                             (2,648)        (2,702)
                                                    ________       ________
Net loans                                           $186,346       $187,969
Bank premises and equipment                            3,478          3,570
Accrued interest receivable                            2,714          2,491
Other assets                                           6,528          6,190
                                                    ________       ________
  Total Assets                                      $381,520       $360,342

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Non-interest bearing                              $ 22,854       $ 24,847
  Interest bearing                                   267,297        246,626
                                                    ________       ________
  Total deposits                                    $290,151       $271,473

Short-term borrowings                                  8,887          8,560
Long-term borrowings                                  40,250         41,250
Accrued interest and other expenses                    2,309          2,231
Other liabilities                                      1,002            171
                                                     _______       ________

  Total Liabilities                                 $342,599       $323,685

STOCKHOLDERS' EQUITY
Common stock, par value $2 per share                   5,867          5,867
Surplus                                                9,761          9,761
Retained earnings                                     23,947         23,311
Accumulated other comprehensive income                 2,443            815
Less treasury stock at cost 100,000
  shares in 2000 and 1999                             (3,097)        (3,097)
                                                     _______        _______

   Total Stockholders' Equity                       $ 38,921       $ 36,657
                                                    ________       ________
   Total Liabilities and
     Stockholders' Equity                           $381,520       $360,342



See Accompanying Notes to Consolidated Financial Statements

</TABLE>


                                  1


<PAGE>


<TABLE>

               FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF INCOME
          FOR THE THREE MONTHS ENDED March 31, 2001 AND 2000
                              (Unaudited)

<CAPTION>

(Amounts in thousands except per share data)

                                                  2001          2000
<S>                                        <C>             <C>
INTEREST INCOME
Interest and fees on loans                        $   3,949       $   3,834
Interest and dividend income on
  securities                                          2,558           2,122
Interest on deposits in banks                           101               1
Other interest income                                    89              87
                                                  _________       _________
  Total Interest Income                           $   6,697       $   6,044

INTEREST EXPENSE
Interest on deposits                              $   3,176       $   2,549
Interest on short-term borrowings                       112             325
Interest on long-term borrowings                        592             344
                                                  _________       _________
  Total Interest Expense                          $   3,880       $   3,218

Net interest income                               $   2,817       $   2,826
Provision for loan losses                               100              75
                                                  _________       _________
Net Interest Income After Provision
  for Loan Losses                                 $   2,717       $   2,751

OTHER INCOME
Service charges on deposit accounts               $     268       $     210
Other non-interest income                               200             142
Investment securities gains
  (losses) net                                           13               3
                                                  _________       _________
  Total Other Income                              $     481       $     355

OTHER EXPENSES
Salaries and employee benefits                    $     956       $     967
Net occupancy and fixed asset
  expense                                               262             244
Other non-interest expense                              483             535
                                                  _________       _________
  Total Other Expenses                            $   1,701       $   1,746

Income before income taxes                        $   1,497       $   1,360
Applicable income tax (benefit)                         294             202
                                                  _________       _________
Net Income                                        $   1,203       $   1,158

PER SHARE DATA
  Net Income                                      $     .42       $     .41
  Cash Dividends                                        .20             .19
  Weighted Average Shares
    Outstanding                                   2,833,727       2,833,727


See Accompanying Notes to Consolidated Financial Statements

</TABLE>


                                  2


<PAGE>

<TABLE>

               FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE THREE MONTHS ENDED March 31, 2001 AND 2000
                              (Unaudited)

<CAPTION>

(Amounts in thousands)                            2001          2000
<S>                                          <C>            <C>
OPERATING ACTIVITIES
Net income                                          $  1,203       $  1,158
Adjustments to reconcile net
  income to net cash provided (used)
  by operating activities:
  Provision for loan losses                              100             75
  Provision for depreciation and
    amortization                                         107            100
  Premium amortization on investment
    securities                                            39             23
  Discount accretion on investment
    securities                                          (284)          (151)
  Gain on sale of mortgage loans                         (47)            (1)
  Proceeds from sale of mortgage loans                 3,949            605
  Originations of mortgage loans
    for resale                                          (692)          (926)
  (Gain) loss on sales of investment
    securities                                           (13)            (3)
  (Gain) loss on sale of other real
    estate owned                                           0             (1)
  Deferred income tax (benefit)                          (28)           (17)
  (Increase) decrease in interest
    receivable and other assets                         (489)          (100)
  Increase (decrease) in interest
    payable, accrued expenses and
    other liabilities                                     95            133
                                                    ________       ________
  NET CASH PROVIDED (USED) BY
    OPERATING ACTIVITIES                            $  3,940       $    895

INVESTING ACTIVITIES
  Purchases of investment securities
    available-for-sale                              $(32,782)      $(14,081)
  Proceeds from sales of investment
    securities available-for-sale                     14,156         11,919
  Proceeds from maturities and
    redemptions of investment
    securities available for sale                      4,569            821
  Proceeds from maturities and
    redemption of investment
    securities held-to-maturity                        2,272          1,607
  Net (increase) decrease in loans                    (1,758)        (2,856)
  Purchase of premises and equipment                     (15)           (52)
  Proceeds from sale of other real
    estate owned                                           0             86
                                                    ________       ________
  NET CASH (USED) BY INVESTING
    ACTIVITIES                                      $(13,558)      $ (2,556)

FINANCING ACTIVITIES
  Net increase (decrease) in deposits               $ 18,678       $ 10,587
  Net increase (decrease) in
    short-term borrowings                                327         (3,578)
  Net increase (decrease)in
    long-term borrowings                              (1,000)        (5,000)
  Cash dividends                                        (567)          (538)
                                                    ________       ________
  NET CASH PROVIDED BY FINANCING
    ACTIVITIES                                      $ 17,438         $1,471

INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                $  7,820       $   (190)
CASH AND CASH EQUIVALENTS, BEGINNING                   9,161          6,964
                                                    ________       ________
CASH AND CASH EQUIVALENTS, ENDING                   $ 16,981       $  6,774

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION
  Cash paid during period for
    Interest                                        $  3,980       $  3,218
    Income Taxes                                          11              0

See Accompanying Notes to Consolidated Financial Statements

</TABLE>


                                  3


<PAGE>

               FIRST KEYSTONE CORPORATION AND SUBSIDIARY
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            March 31, 2001
                              (Unaudited)

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The accounting policies of First Keystone Corporation and
Subsidiary (the "Corporation") are in accordance with accounting
principles generally accepted in the United States of America and
conform to common practices within the banking industry. The more
significant policies follow:

PRINCIPLES OF CONSOLIDATION
   The consolidated financial statements include the accounts of
First Keystone Corporation and its wholly-owned Subsidiary, The First
National Bank of Berwick (the "Bank"). All significant inter-company
balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS
   The Corporation, headquartered in Berwick, Pennsylvania,
provides a full range of banking, trust and related services through
its wholly owned Bank subsidiary and is subject to competition from
other financial institutions in connection with these services. The
Bank serves a customer base which includes individuals, businesses,
public and institutional customers primarily located in the Northeast
Region of Pennsylvania. The Bank has nine full service offices and 12
ATMs located in Columbia, Luzerne and Montour Counties. The
Corporation and its subsidiary must also adhere to certain federal
banking laws and regulations and are subject to periodic examinations
made by various federal agencies.

SEGMENT REPORTING
   The Corporation's banking subsidiary acts as an independent
community financial services provider, and offers traditional banking
and related financial services to individual, business and government
customers. Through its branch and automated teller machine network,
the Bank offers a full array of commercial and retail financial
services, including the taking of time, savings and demand deposits;
the making of commercial, consumer and mortgage loans; and the
providing of other financial services. The Bank also performs
personal, corporate, pension and fiduciary services through its Trust
Department.
   Management does not separately allocate expenses, including the
cost of funding loan demand, between the commercial, retail, trust and
mortgage banking operations of the Corporation. Currently, management
measures the performance and allocates the resources of First Keystone
Corporation as a single segment.

USE OF ESTIMATES
   The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of these consolidated financial statements
and the reported amounts of income and expenses during the reporting
periods. Actual results could differ from those estimates.

INVESTMENT SECURITIES
   The Corporation classifies its investment securities as either
"Held-to-Maturity" or "Available-for-Sale" at the time of purchase.
Debt securities are classified as held-to-maturity when the
Corporation has the ability and positive intent to hold the securities
to maturity. Investment securities Held-to-Maturity are carried at
cost adjusted for amortization of premium and accretion of discount to
maturity.
   Debt securities not classified as Held-to-Maturity and equity
securities are included in the Available-for-Sale category and are
carried at fair value. The amount of any unrealized gain or loss, net
of the effect of deferred income taxes, is reported as other
comprehensive income as a component of Stockholders' Equity.
Management's


                                  4


<PAGE>

decision to sell available-for-sale securities is based on changes in
economic conditions controlling the sources and applications of funds,
terms, availability of and yield of alternative investments, interest
rate risk and the need for liquidity.
   The cost of debt securities classified as Held-to-Maturity or
Available-for-Sale is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretion,
as well as interest and dividends is included in interest income from
investments. Realized gains and losses are included in net investment
securities gains. The cost of investment securities sold, redeemed or
matured is based on the specific identification method.
   Equity securities that do not have readily determinable fair
values such as Federal Reserve Bank Stock, Federal Home Loan Bank
Stock and Bankers' bank stock are carried at cost and are included in
other assets and the income is reflected as other interest income.

LOANS
   Loans are stated at their outstanding unpaid principal balances,
net of deferred fees or costs, unearned income and the allowance for
loan losses. Interest on installment loans is recognized as income
over the term of each loan, generally, by the "actuarial method".
Interest on all other loans is primarily recognized based upon the
principal amount outstanding. Loan origination fees and certain direct
loan origination costs have been deferred with the net amount
amortized using the interest method over the contractual life of the
related loans as an interest yield adjustment.
   Mortgage loans held for resale are carried at the lower of cost
or market on an aggregate basis. These loans are sold without recourse
to the Corporation.

Non-Accrual Loans - Generally, a loan is classified as non-accrual and
the accrual of interest on such a loan is discontinued when the
contractual payment of principal or interest has become 90 days past
due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing. A
loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is
placed on non-accrual status, unpaid interest credited to income in
the current year is reversed and unpaid interest accrued in prior
years is charged against the allowance for loan losses. Certain
        non-accrual loans may continue to perform, that is, payments are still
being received. Generally, the payments are applied to principal.
These loans remain under constant scrutiny and if performance
continues, interest income may be recorded on a cash basis based on
management's judgement as to collectibility of principal.

Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for
loan losses and subsequent recoveries, if any, are credited to the
allowance.
   A principal factor in estimating the allowance for loan losses
is the measurement of impaired loans. A loan is considered impaired
when, based on current information and events, it is probable that the
Corporation will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Under current accounting
standards, the allowance for loan losses related to impaired loans is
based on discounted cash flows using the effective interest rate of
the loan or the fair value of the collateral for certain collateral
dependent loans.
   The allowance for loan losses is maintained at a level estimated
by management to be adequate to absorb potential loan losses.
Management's periodic evaluation of the adequacy of the allowance for
loan losses is based on the Corporation's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and
other relevant factors. This evaluation is inherently subjective as it
requires material estimates including the amounts and timing of future
cash flows expected to be received on impaired loans that may be
susceptible to significant change.



                                  5


<PAGE>

PREMISES AND EQUIPMENT
   Premises and equipment are stated at cost less accumulated
depreciation computed principally on the straight-line method over the
estimated useful lives of the assets. Maintenance and minor repairs
are charged to operations as incurred. The cost and accumulated
depreciation of the premises and equipment retired or sold are
eliminated from the property accounts at the time of retirement or
sale, and the resulting gain or loss is reflected in current
operations.

MORTGAGE SERVICING RIGHTS
   The Corporation originates and sells real estate loans to
investors in the secondary mortgage market. After the sale, the
Corporation retains the right to service certain loans. When
originated mortgage loans are sold and servicing is retained, a
servicing asset is capitalized based on relative fair value at the
date of sale. Servicing assets are amortized as an offset to other
fees in proportion to, and over the period of, estimated net servicing
income. The unamortized cost is included in other assets in the
accompanying consolidated balance sheet. The servicing rights are
periodically evaluated for impairment based on their relative fair
value.

FORECLOSED ASSETS HELD FOR SALE
   Real estate properties acquired through, or in lieu of, loan
foreclosure are held for sale and are initially recorded at fair value
on the date of foreclosure establishing a new cost basis. After
foreclosure, valuations are periodically performed by management and
the real estate is carried at the lower of carrying amount or fair
value less cost to sell and is included in other assets. Revenues
derived from and costs to maintain the assets and subsequent gains and
losses on sales are included in other non-interest income and expense.

INCOME TAXES
   The provision for income taxes is based on the results of
operations, adjusted primarily for tax-exempt income. Certain items of
income and expense are reported in different periods for financial
reporting and tax return purposes. Deferred tax assets and liabilities
are determined based on the differences between the consolidated
financial statement and income tax bases of assets and liabilities
measured by using the enacted tax rates and laws expected to be in
effect when the timing differences are expected to reverse. Deferred
tax expense or benefit is based on the difference between deferred tax
asset or liability from period to period.

PER SHARE DATA
   Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share, requires dual presentation of basic and fully
diluted earnings per share. Basic earnings per share is calculated by
dividing net income by the weighted average number of shares of common
stock outstanding at the end of each period. Fully diluted earnings
per share is calculated by increasing the denominator for the assumed
conversion of all potentially dilutive securities. The Corporation's
dilutive securities are limited to stock options which currently have
no effect on earnings per share since the market price per share
historically has not been greater than the lowest stock option
exercise price.
   Per share data has been adjusted retroactively for stock splits
and stock dividends.

CASH FLOW INFORMATION
   For purposes of reporting consolidated cash flows, cash and cash
equivalents include cash on hand and due from other banks and interest
bearing deposits in other banks. The Corporation considers cash
classified as interest bearing deposits with other banks as a cash
equivalent since they are represented by cash accounts essentially on
a demand basis.

TRUST ASSETS AND INCOME
   Property held by the Corporation in a fiduciary or agency
capacity for its customers is not included in the accompanying
consolidated financial statements since such items are not assets of
the Corporation. Trust Department income is generally recognized on a
cash basis and is not materially different than if it were reported on
an accrual basis.



                                  6


<PAGE>

NEW ACCOUNTING STANDARDS
   Statement of Financial Accounting Standards (SFAS) No. 133 (as
amended by SFAS No. 138), "Accounting for Derivative Instruments and
Hedging Activities", becomes effective for financial reporting periods
beginning after June 15, 2000. SFAS 133 requires the recognition of
the fair value of all derivative instruments on the consolidated
balance sheet. Since the Corporation does not enter into transactions
involving derivatives described in the standard and does not engage in
hedging activities, the standard is not expected to have a significant
impact on the Corporation's consolidated financial condition or
results of operations.
   Statement of Financial Accounting Standards (SFAS) No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities", is generally effective for
transactions occurring after March 31, 2001. For recognition and
reclassification of collateral and for disclosure related to
securitization transactions and collateral, the effective date is for
fiscal years ending after December 15, 2000. SFAS No. 140 replaces
SFAS No. 125 and provides revisions to the standards for accounting
and requirements for certain disclosures relating to securitzations
and other transfers of financial assets. The standard is not expected
to have a significant impact on the Corporation's consolidated
financial condition or results of operations.

REPORTING FORMAT
   Certain amounts in the consolidated financial statements of
prior periods have been reclassified to conform with presentation used
in the 2001 consolidated financial statements. Such reclassifications
have no effect on the Corporation's consolidated financial condition
or net income.


NOTE 2.  ALLOWANCE FOR LOAN LOSSES

   Changes in the allowance for loan losses for the periods ended
March 31, 2001, and March 31, 2000, were as follows:

<TABLE>
<CAPTION>

(amounts in thousands)
                                               2001          2000
<S>                                        <C>           <C>
Balance, January 1                               $2,702        $2,600
Provision charged to operations                     100            75
Loans charged off                                  (165)          (79)
Recoveries                                           11             4
                                                               ______   ______
Balance, March 31                                $2,648        $2,600

</TABLE>

   At March 31, 2001, the recorded investment in loans that are
considered to be impaired as defined by SFAS No. 114 was $154,195. No
additional charge to operations was required to provide for the
impaired loans since the total allowance for loan losses is estimated
by management to be adequate to provide for the loan loss allowance
required by SFAS No. 114 along with any other potential losses.
   At March 31, 2001, there were no significant commitments to lend
additional funds with respect to non-accrual and restructured loans.


NOTE 3.  SHORT-TERM BORROWINGS

   Federal funds purchased, securities sold under agreements to
repurchase and Federal Home Loan Bank advances generally represent
overnight or less than 30-day borrowings. U.S. Treasury tax and loan
notes for collections made by the Bank are payable on demand.



                                  7


<PAGE>

NOTE 4.  LONG-TERM BORROWINGS

   Long-term borrowings are comprised of advances from the Federal
Home Loan Bank (FHLB). Under terms of a blanket agreement, collateral
for the loans are secured by certain qualifying assets of the
Corporation's banking subsidiary which consist principally of first
mortgage loans and certain investment securities.


NOTE 5.  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND
         CONCENTRATIONS OF CREDIT RISK

   The Corporation is a party to financial instruments with off-balance sheet
        risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. Those
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of those
instruments reflect the extent of involvement the Corporation has in
particular classes of financial instruments. The Corporation does not
engage in trading activities with respect to any of its financial
instruments with off-balance sheet risk.
   The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is
represented by the contractual notional amount of those instruments.
   The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance
sheet instruments.
   The Corporation may require collateral or other security to
support financial instruments with off-balance sheet credit risk. The
contract or notional amounts at March 31, 2001, and December 31, 2000,
were as follows:


<TABLE>
<CAPTION>

(amounts in thousands)                        March 31,       December 31,
                                               2001              2000
                                               _______         ______
<S>                                        <C>             <C>
Financial instruments whose
  contract amounts represent
  credit risk:
  Commitments to extend credit                     $18,118        $15,467
  Standby letters of credit                        $ 1,005        $   947

</TABLE>


   Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or
other termination clauses that may require payment of a fee. Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future
cash requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of
credit, is based on management's credit evaluation of the counter-party.
        Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and income-producing
commercial properties.
   Standby letters of credit are conditional commitments issued by
the Corporation to guarantee the performance of a customer to a third
party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Corporation may hold collateral to support standby
letters of credit for which collateral is deemed necessary.
   The Corporation grants commercial, agribusiness and residential
loans to customers within the state. It is management's opinion that
the loan portfolio was balanced and diversified at March 31, 2001, to
the extent necessary to avoid any significant concentration of credit
risk.


                                  8


<PAGE>

NOTE 6.  STOCKHOLDERS' EQUITY

     Changes in Stockholders' Equity for the period ended March 31,
2001, were are follows:

<TABLE>
<CAPTION>

(Amounts in thousands, except common share data)


                                         Common          Common
                                         Shares         Stock        Surplus
                                         ______          ______      _______

<S>                                  <C>              <C>          <C>
Balance at January 1, 2001                2,933,727        $5,867       $9,761

Comprehensive Income:
  Net Income
    Change in unrealized
    gain (loss) on
    investment securities
    available-for-sale,
    net of reclassification
    adjustment and tax
    effects
  Total Comprehensive
    income (loss)
Cash dividends -
   $.20 per share

                                          _________        ______       ______
Balance at March 31, 2001                 2,933,727        $5,867       $9,761




<CAPTION>

(Amounts in thousands, except common share data)

                                                               Accumulated
                                     Compre-                       Other
                                     hensive       Retained   Comprehensive
                                     Income         Earnings   Income (Loss)
                                     ______        _______      __________

<S>                                <C>          <C>           <C>
Balance at January 1, 2001                           $23,311       $   815

Comprehensive Income:
  Net Income                           $1,203          1,203
    Change in unrealized
    gain (loss) on
    investment securities
    available-for-sale,
    net of reclassification
    adjustment and tax
    effects                             1,628                        1,628
                                       ______
  Total Comprehensive
     income (loss)                     $2,831
Cash dividends -
   $.20 per share                                       (567)

                                                     _______        ______
Balance at March 31, 2001                            $23,947        $2,443



<CAPTION>

(Amounts in thousands, except common share data)


                                      Treasury
                                        Stock         Total
                                        _____         _____

<S>                                <C>             <C>
Balance at January 1, 2001              $(3,097)        $36,657

Comprehensive Income:
  Net Income                                              1,203
    Change in unrealized
    gain (loss) on
    investment securities
    available-for-sale,
    net of reclassification
    adjustment and tax
    effects                                               1,628
  Total Comprehensive
     income (loss)
Cash dividends -
   $.20 per share                                          (567)

                                        _______         _______
Balance at March 31, 2001               $(3,097)        $38,921

</TABLE>


NOTE 7.  MANAGEMENT'S ASSERTIONS AND COMMENTS REQUIRED TO BE
         PROVIDED WITH FORM 10Q FILING

 In management's opinion, the consolidated interim financial
statements reflect fair presentation of the consolidated financial
position of First Keystone Corporation and Subsidiary, and the results
of their operations and their cash flows for the interim periods
presented.  Further, the consolidated interim financial statements are
unaudited; however they reflect all adjustments, which are in the
opinion of management, necessary to present fairly the consolidated
financial condition and consolidated results of operations and cash
flows for the interim periods presented and that all such adjustments
to the consolidated financial statements are of a normal recurring
nature.  The independent accountants, J. H. Williams & Co., LLP,
reviewed these consolidated financial statements as stated in their
accompanying review report.
 The results of operations for the three-month period ended March
31, 2001, are not necessarily indicative of the results to be expected
for the full year.
 These consolidated interim financial statements have been
prepared in accordance with requirements of Form 10Q and therefore do
not include all disclosures normally required by generally accepted
accounting principles applicable to financial institutions as included
with consolidated financial statements included in the Corporation's
annual Form 10K filing.  The reader of these consolidated interim
financial statements may wish to refer to the Corporation's annual
report or Form 10K for the period ended December 31, 2000, filed with
the Securities and Exchange Commission.



                                  9


<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders of First Keystone Corporation:


We have reviewed the accompanying consolidated balance sheet of First
Keystone Corporation and Subsidiary as of March 31, 2001, and the
related consolidated statements of income and cash flows for the
three-month periods ended March 31, 2001, and 2000.  These
consolidated financial statements are the responsibility of the
management of First Keystone Corporation and Subsidiary.

We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants.  A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters.  It is
substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States of America,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole.  Accordingly, we do not express
such an opinion.

Based on our reviews, we are not aware of any material modifications
that should be made to the consolidated financial statements referred
to above for them to be in conformity with accounting principles
generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the consolidated
balance sheet of First Keystone Corporation and Subsidiary as of
December 31, 2000, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated January 10, 2001, we
expressed an unqualified opinion on those consolidated financial
statements.  In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 2000, is
fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.




/s/ J. H. Williams & Co., LLP
J. H. Williams & Co., LLP



Kingston, Pennsylvania
April 24, 2001



                                 10


<PAGE>

Item 2.  First Keystone Corporation Management's Discussion
         and Analysis of Financial Condition and Results of
         Operation as of March 31, 2001



RESULTS OF OPERATIONS

 First Keystone Corporation realized earnings for the first
quarter of 2001 of $1,203,000, an increase of $45,000, or 3.9% over
the first quarter of 2000.  The increase in net income for the first
quarter of 2001 was primarily the result of an increase of $126,000,
or 35.5% in non-interest income or other income, and a decrease in
total other expense of $45,000, or 2.6%.  The tightening of our net
interest margin resulted in net interest income  remaining relatively
stable at $2,817,000 for the first quarter of 2001 compared to
$2,826,000 for the first quarter of 2000.  On a per share basis, net
income per share increased to $.42 for the first three months of 2001
compared to $.41 for the first three months of 2000, while dividends
increased to $.20 per share up from $.19 in 2000, or an increase of
5.3%.

 Year-to-date net income annualized amounts to a return on
average common equity of 12.87% and a return on assets of 1.30%.  For
the three months ended March 31, 2000, these measures were 15.83% and
1.40%, respectively on an annualized basis.


NET INTEREST INCOME

 The major source of operating income for the Corporation is net
interest income, defined as interest income less interest expense. In
the first quarter of 2001, net interest income decreased slightly
because of our reduced net interest margin.  In the first quarter of
2001, interest income amounted to $6,697,000, an increase of $653,000
or 10.8% over the first quarter of 2000, while interest expense
amounted to $3,880,000 in the first quarter of 2001, an increase of
$662,000, or 20.6% over the first quarter of 2000.  As a result, net
interest income decreased $9,000, or 0.3% over the first quarter of
2000.

 Our net interest margin for the quarter ended March 31, 2001,
was 3.48% compared to 3.96% for the quarter ended March 31, 2000.


PROVISION FOR LOAN LOSSES


 The provision for loan losses for the quarter ended March 31,
2001, was $100,000, compared to the $75,000 provision for the first
quarter of 2000.  Net charge-offs totaled $154,000 for the three
months ended March 31, 2001, as compared to $75,000 for the first
three months of 2000.  The allowance for loan losses as a percentage
of loans, net of unearned interest, was 1.40% as of March 31, 2001, as
compared to 1.42% as of December 31, 2000, and 1.38% as of March 31,
2000.


NON-INTEREST INCOME

 Total non-interest income or other income was $481,000 for the
quarter ended March 31, 2001, as compared to $355,000 for the quarter
ended March 31, 2000, an increase of $126,000, or 35.5%.  Excluding
investment security gains and losses, non-interest income was $468,000
for the first quarter of 2001, an increase of $116,000 over the first
quarter of 2000.  An increase in service charges on deposit accounts
and an increase in other non-interest income, were the primary reasons
for the increase in non-interest income.



                                 11


<PAGE>

NON-INTEREST EXPENSES

 Total non-interest expenses, or other expenses, was $1,701,000
for the quarter ended March 31, 2001, as compared to $1,746,000 for
the quarter ended March 31, 2000.  The decrease of $45,000 is
comprised of salary and benefits decreasing $11,000, occupancy expense
increasing $18,000, and other non-interest expense decreasing $52,000.
The overall decrease in non-interest expenses was $45,000, or 2.6%.

 Expenses associated with employees (salaries and employee
benefits) continue to be the largest category of non-interest
expenses.  Salaries and benefits amount to 56.2% of total non-interest
expense for the three months ended March 31, 2001, as compared to
55.4% for the first three months of 2000.  Other non-interest expenses
amounted to $483,000 for the three months ended March 31, 2001, a
decrease of $52,000, or 9.7% over the first three months of 2000.
With the decrease in our non-interest expense in the first quarter,
our overall non-interest expense is less than 2% of average assets on
an annualized basis, which places us among the leaders of our peer
financial institutions at controlling total non-interest expense.


INCOME TAXES

 Effective tax planning has helped produce favorable net income.
The effective total income tax rate was 19.6% for the first quarter of
2001 as compared to 14.9% for the first quarter of 2000.   The
increase in our effective tax rate in the first quarter of 2001 was
due primarily to the limited opportunities to purchase municipal
(tax-free investments) securities at relatively attractive interest rates.


ANALYSIS OF FINANCIAL CONDITION

ASSETS

 Total assets increased to $381,520,000 as of March 31, 2001, an
increase of $21,178,000, or 5.9% over year-end 2000.  Total deposits
increased to $290,151,000 as of March 31, 2001, an increase of
$18,678,000, or 6.9% over year-end 2000.

 With the increase in total deposits, the Corporation did not
increase borrowed funds.  Short-term borrowings remained stable at
$8,887,000 as of March 31, 2001, comparable to $8,560,000 as of March
30, 2000.  Long-term borrowings decreased by $1,000,000 to $40,250,000
as of March 31, 2001.


EARNING ASSETS

 Our primary earning asset, loans, net of unearned income
decreased to $188,994,000 as of March 31, 2001, down $1,677,000, or
0.9% since year-end 2000.  The loan portfolio continues to be well
diversified and overall asset quality remains strong with past-due
loans and non-performing assets remaining relatively stable.

 Our investment portfolio increased in size from December 31,
2000, to March 31, 2001.  Held-to-maturity securities amounted to
$8,459,000 as of March 31, 2001, a decrease of $278,000 from December
31, 2000.  However, available-for-sale securities amounted to
$157,014,000 as of March 31, 2001, an increase of $14,790,000 from
year-end 2000.  Interest bearing deposits with banks increased to
$11,300,000 as of March 31, 2001, compared to $2,428,000 as of
December 31, 2000.



                                  12


<PAGE>

ALLOWANCE FOR LOAN LOSSES

 Management performs a quarterly analysis to determine the
adequacy of the allowance for loan losses.  The methodology in
determining adequacy incorporates specific and general allocations
together with a risk/loss analysis on various segments of the
portfolio according to an internal loan review process.  Management
maintains its loan review and loan classification standards consistent
with those of its regulatory supervisory authority.  Management feels,
considering the conservative portfolio composition, which is largely
composed of small retail loans (mortgages and installments) with
minimal classified assets, low delinquencies, and favorable loss
history, that the allowance for loan loss is adequate to cover
foreseeable future losses.

 Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Industry Guide 3 do not (i) represent or result from trends or
uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.

 The Corporation was required to adopt Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" - Refer to Note 5 above for details.


NON-PERFORMING ASSETS

 Non-performing assets consist of non-accrual and restructured
loans, other real estate and foreclosed assets, together with loans
past-due 90 days or more and still accruing.  As of March 31, 2001,
total non-performing assets were $1,104,000 as compared to $742,000 on
December 31, 2000.  Non-performing assets to total loans and
foreclosed assets was .58% as of March 31, 2001, and .21% as of
December 31, 2000.

 Interest income received on non-performing loans as of March 31,
2001, was $5,179 compared to $30,345 as of December 31, 2000.
Interest income, which would have been recorded on these loans under
the original terms as of March 31, 2001, and December 31, 2000, were
$20,831 and $67,584, respectively.  As of March 31, 2001 and December
31, 2000, there was no outstanding commitments to advance additional
funds with respect to these non-performing loans.


DEPOSITS AND OTHER BORROWED FUNDS

 As indicated previously, total deposits increased $18,678,000 as
non-interest bearing deposits decreased by $1,993,000 and interest
bearing deposits increased by $20,671,000 as of March 31, 2001, from
year-end 2000.  Total short-term and long-term borrowings declined
slightly by $673,000 from year-end 2000.


CAPITAL STRENGTH

 Normal increases in capital are generated by net income, less
cash dividends paid out.  Also, net unrealized gains on investment
securities available-for-sale increased shareholders' equity, or
capital, net of taxes by $2,443,000 as of March 31, 2001, and $815,000
as of December 31, 2000.  Our stock repurchase plan indicates 100,000
shares being repurchased as of March 31, 2001 and December 31, 2000.
This had an effect of our reducing our total stockholders' equity by
$3,097,000 as of both March 31, 2001 and December 31, 2000.  Total
stockholders' equity was $38,921,000 as of March 31, 2001, compared to
$36,657,000 as of December 31, 2000.



                                  13


<PAGE>

 Leverage ratio and risk based capital ratios remain very strong.
As of March 31, 2001, our leverage ratio was 9.87% as compared to
10.47% as of December 31, 2000.  In addition, Tier 1 risk based
capital and total risk based capital ratio as of March 31, 2001, were
15.67% and 16.99%, respectively.  The same ratios as of December 31,
2000, were 16.25% and 17.55%, respectively.


LIQUIDITY

 The liquidity position of the Corporation remains adequate to
meet customer loan demand and deposit fluctuation.  Managing liquidity
remains an important segment of asset liability management.  Our
overall liquidity position is maintained by an active asset liability
management committee.

 Management feels its current liquidity position is
satisfactorily given a very stable core deposit base which has
increased annually.  Secondly, our loan payments and principal
paydowns on our mortgage backed securities provide a steady source of
funds.  Also, short-term investments and maturing investment
securities represent additional sources of liquidity.  Finally, short-term
          borrowings are readily accessible at the Federal Reserve Bank,
Atlantic Central Bankers Bank, or the Federal Home Loan Bank.



                                  14


<PAGE>

                      PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings

               None.


     Item 2.   Changes in Securities

               None.


     Item 3.   Defaults Upon Senior Securities

               None.


     Item 4.   Submission of Matters to a Vote of Security Holders

               Annual Meeting of Shareholders of First Keystone
               Corporation held on Tuesday, April 17, 2001, at 10:00
               a.m.


<TABLE>
<CAPTION>
                                                     Votes      Votes
Directors Elected                  Votes For        Against      Withheld
_________________                  _________       ______       _______
<S>                            <C>              <C>             <C>
John Arndt                     2,431,315        50,404          0
J. Gerald Bazewicz             2,431,315        50,404          0
Robert E. Bull                 2,430,767        50,952          0


<CAPTION>
                                                Broker
Directors Elected              Abstentions      Non-Votes
_________________              ___________      _________
<S>                            <C>              <C>
John Arndt                     0                0
J. Gerald Bazewicz             0                0
Robert E. Bull                 0                0

</TABLE>


Directors Continuing:
____________________

John L. Coates, term expires in 2002
Dudley P. Cooley, term expires in 2002
Budd L. Beyer, term expires in 2003
Frederick E. Crispin, Jr., term expires in 2003
Jerome F. Fabian, term expires in 2003
Robert J. Wise, term expires in 2003


Matters Voted Upon:
__________________

Selection of J. H. Williams & Co. LLP, as auditors for the
Corporation.

Votes For -  2,463,445
Votes Against -  17,731
Votes Withheld -  0
Abstentions -  543
Broker Non-Votes -  0


     Item 5.   Other Information

               None.



                                  15


<PAGE>

     Item 6.   Exhibits and Reports on Form 8-K

               (a)  Exhibits required by Item 601 Regulation S-K


Exhibit Number         Description of Exhibit

   3(i)                Articles of Incorporation, as amended

   3(ii)               Bylaws, as amended

   10.1                Supplemental Employee Retirement Plan
                       (Incorporated by reference to Exhibit 10 to
                       Registrant's Form 10-K for the year ended
                       December 31, 2000)

   10.2                Management Incentive Compensation Plan
                       (Incorporated by reference to Exhibit 10 (Page
                       18) to Registrant's  Form 10Q for the quarter
                       ended June 30, 1997)

   10.3                Profit Sharing Plan Summary (Incorporated by
                       reference to Exhibit 10 (Page 16) to
                       Registrant's Form 10Q for the quarter ended
                       June 30, 1997)

   10.4                First Keystone Corporation 1998 Stock Incentive
                       Plan (Incorporated by reference to Exhibit 99
                       to the Registrant's Annual Report on Form 10-K
                       for the year ended December 31, 1997)

    11                 Statement RE:  Computation of Earnings Per
                       Share.


           (b)  During the quarter ended March 30, 2001, the
registrant filed the following reports on Form 8-K:

Date of Report      Item       Description
______________      ____       ___________

March 27, 2001        5        Press release announcing share buyback
                               plan.



                                  16


<PAGE>


                      FIRST KEYSTONE CORPORATION

                              SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                              FIRST KEYSTONE CORPORATION
                              Registrant


May 11, 2001
                              J. Gerald Bazewicz
                              President and
                              Chief Executive Officer
                              (Principal Executive Officer)



May 11, 2001
                              David R. Saracino
                              Treasurer/Assistant Secretary
                              (Principal Accounting Officer)



                                  17


<PAGE>


                           INDEX TO EXHIBITS

Exhibit             Description
_______             ___________

 10.1               Supplemental Employee Retirement Plan
                    (Incorporated by reference to Exhibit 10 to
                    Registrant's Form 10-K for the year ended December
                    31, 2000)

 10.2               Management Incentive Compensation Plan
                    (Incorporated by reference to Exhibit 10 (Page 18)
                    to Registrant's Form 10Q for the quarter ended
                    June 30, 1997)

 10.3               Profit Sharing Plan Summary (Incorporated by
                    reference to Exhibit 10 (Page 16) to Registrant's
                    Form 10Q for the quarter ended June 30, 1997)

 10.4               First Keystone Corporation 1998 Stock Incentive
                    Plan (Incorporated by reference to Exhibit 99 to
                    the Registrant's Annual Report on Form 10-K for
                    the year ended December 31, 1997)

  11                Compensation of Earning Per Share



                                  18